In this year’s report, we see how many law firms are edging toward rethinking their business model in light of technological advancements, even as they celebrate a record-breaking performance over the past year
The performance of law firms in 2024 is perhaps best reflected in three key metrics — demand, rates, and expenses — in which results have been surprisingly strong, especially by historical standards in the era since the global financial crisis.
However, while these year-end results for many law firms are encouragingly strong, the underlying factors of the marketplace clearly point to the need for law firm leaders to perhaps rethink how their firm conducts business. Indeed, the rapidly evolving landscape of the legal industry in 2025 may have finally pushed law firms toward an answer to the question, “Is law a profession or a business?”
It is with great sadness and profound gratitude that we dedicate the “2025 Report on the State of the US Legal Market” to the memory of our good friend and colleague, Jim Jones, whose recent passing is felt by all who knew him.
As we see in the data that underpins the new 2025 Report on the State of the US Legal Market, published jointly by the Thomson Reuters Institute and the Center on Ethics and the Legal Profession at Georgetown Law, the answer is the latter, as law firms operate increasingly like the sophisticated businesses they are.
This year’s report highlights significant shifts in law firm business models, driven by changing client expectations, competitive market dynamics, and — perhaps most significantly — advancements in AI-driven technology.
Key findings
Some of the key findings in the report include:
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- The importance of rethinking the law firm model — From GenAI to the equity partnership and the billable hour, the report breaks down the crucial metamorphosis firms are currently undergoing.
- Assessing the strength of 2024 law firm performance — Despite uncertainty in the broader economy, law firms have shown strong resilience, especially in profits per equity partner and overall profitability.
- Continued “triple” threat strengthens law firms — The combination in 2024 of historic, broad-based growth in legal demand, billing rates that continued to allow for significant increases, and effective control over expenses provided law firms with a triple threat of positive metrics that carried through to their strong overall performance.
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Of course, it isn’t all positives as the report points out several significant challenges that law firms will have to manage over the coming year, including issues around talent and firms’ approaches to technological advancements, particularly generative AI, which is expected to transform legal services, influence client expectations, and necessitate new pricing models.
Indeed, the coming year is likely to highlight the importance of agility and innovation in the legal industry — traits which unfortunately, are not historical strong points for law firms. Yet the report makes clear that law firm leaders should take advantage of the benefits of a profitable 2024 to invest in strategies that focus on retooling their business models and embracing new technologies in order to remain more competitive and meet the changing needs of their clients.
While these year-end results for many law firms are encouragingly strong, the underlying factors of the marketplace clearly point to the need for law firm leaders to perhaps rethink how their firm conducts business.
The successes of 2024 should not be used as a reason to stand pat, however, because even as law firms enjoy strong financial tailwinds, the legal market is changing rapidly. Clearly, some law firm leaders understand that this revolution is already underway as many firms have started to take new shapes, both in response to innovations already experienced as well as in anticipation of what may come.
As this year’s report illustrates, those firms most willing to innovate and adapt will be those that thrive in the new year and beyond.
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